The Game Boy has helped Nintendo's financial results, because it has been a much more consistent performer. Taking part in the "console wars" is expensive, time-consuming, and risky. The risks are incurred upfront; the rewards come on the back half of the journey. Having the support of regular revenues derived from the Game Boy certainly doesn't hurt when you're involved in such an uncertain undertaking as launching a new console every half decade or so.

Conclusion

Apparently, most Japanese gamers now believe the Nintendo Wii will come out on top in this round of the console wars. That's a surprising and somewhat disturbing finding. If the Wii really is a revolution in the making, I suppose they'll be right. But, I still think this is Sony's race to lose.

What will the price of a PS3 be in December of 2007? Until I know that, I can't predict anything other than a much tighter race this time around.

What about Nintendo as an investment? The stock isn't expensive, if you expect it to win the next round of the console wars. Otherwise, it's difficult to value. There are two big issues: the Wii and handheld gaming.

I'm not convinced there are going to be serious competitive threats to Nintendo's position in handheld gaming coming from high-tech cell phones that are quickly becoming the Swiss Army Knife of the 21st century. I just don't think the three great obstacles of clumsy controls, a lack of focus from the manufacturer, and a lack of interest from the user are going to be easy to overcome. Nintendo is in the best position of any company to profit from handheld gaming in the future. They will face competition; but, they will start with the advantage of knowing what their product is (a game machine).

So, if you are comfortable with Nintendo's position in handheld gaming and you truly believe in both the company and the Wii, it would be a reasonable long-term investment at this price. However, even considering the large amount of cash and securities on the balance sheet relative to Nintendo's market cap, it isn't a "value" style purchase based on past performance alone. Buying shares at the current price is a bet on a brighter future.

While I like Nintendo's prospects at the moment, it's usually safer to bet against the revolution. So, I'd have to say Nintendo is a very interesting business that's priced a bit too high to be a very interesting investment.

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